What's the story?
Wal-Mart and Amazon accounted for 12% each of the total music market last quarter, says NPD. They're just doing it in different ways: Sam Walton's retail machine simply sells CDs, while Amazon peddles both digital downloads and mail-order discs. And of course, Apple's iTunes store is all digital, all the time.
The NPD report is not based on wallet-spend volumes, but rather a unit-based calculation that treats every 12 individual song downloads as the equivalent of an album. You could argue that the rise of single-track downloads is hurting the music industry, because consumers have no incentive to pay more for filler tracks they might not want to hear. However, I'd assert that the ability to cherry-pick only the good stuff inspires music lovers to buy more music, or at least just as much as before: one song here, another one there, mix-tape style.
All the young dudes
Apple's mighty 28% market share is a testament to the power of instant gratification and a user-friendly ordering system. But it's far from the only game in town, as Amazon actually increased its digital market share by 4 percentage points, while Apple's held steady with a mere 1% gain. Google
Exceeding Apple's dominant 70% share of digital music sales may not be possible, and it will take years to even come close. Then again, Google doesn't mind shunting sales to both Amazon MP3 and iTunes through the music videos shown on YouTube. Maybe total domination isn't Google's goal here.
The other side of the tracks
Conversely, it would behoove traditional retailers to take Amazon's lead and start selling a little bit of every available format. Best Buy
Apple's only weakness
Maybe Apple's worst enemy is its own immense power in this sector. The U.S. Department of Justice is allegedly sniffing around Cupertino for signs of monopolistic behavior.
Apple has applied pressure on major music labels like Sony
The investigation brings back not-so-fond memories of Microsoft
This way to the future
A digital music seller with the power to beat Wal-Mart was just a silly dream a couple of short years ago. Now, there are two e-commerce solutions beating the Waltons at their own game. Is there any doubt anymore that modern consumers prefer the easy browsing, immediate satisfaction, and scratch-proof format of a well-stocked digital catalog? The concept works, and old-world dinosaurs like Best Buy and Wal-Mart are starting to look silly for not going after this market with gusto.
Apple's enormous slice of the pie notwithstanding, Amazon is the one company truly doing music sales right. There are real CDs for customers who like to own a physical artifact with artwork and liner notes, and a full-featured MP3 store for the rest of us. Amazon is busy on many fronts, from cloud computing to e-books and back again, but its music store is becoming a very valuable contributor to its whole operation.
Will Amazon MP3 ever pass iTunes in popularity? Stranger things have happened, I suppose. Get the discussion started in the comments below.
Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Best Buy, Microsoft, and Wal-Mart Stores are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Apple, Amazon.com, and Best Buy are Motley Fool Stock Advisor picks. Motley Fool Options has recommended a bull call spread position on Best Buy. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Best Buy. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.